Saturday, October 27, 2007

IMF reports robust growth for Africa

According to the IMF, sub-Saharan Africa can expect to see its economy experience a change in growth from 6% in 2007 to nearly 7% in 2008, an increase largely resulting from the coalescing of a surge in commodity prices and investments, and sound policy reforms instituted by regional governments. Further, the growth is mostly attributed to oil exporting countries, but this fact provides assurance to the IMF that the growth is sustainable. Historically, economic growth in the region has been unstable because of institutional weakness and fluctuating commodity prices, and often a period of growth was followed by a disastrous collapse in output. Yet the IMF is hopeful that the situation is different this time around, again owing mostly to sound policies being implemented in the region.

However, the IMF’s hopefulness is not without caution—it noted several adverse potentialities. For instance, the IMF warned that though donor-funding is allowing for growth, the supply of that funding are not poised to keep up with the demand. An increase in donor commitments is needed for the region to maintain growth and avoid a future collapse.

Finally, the IMF noted that while countries in the region have come along way with policy reform, a good deal of reform is still needed in certain countries, particularly reforms related to expenditures in the medium-term. The IMF is nevertheless satisfied with the perceived effectiveness of its policy advice and capacity building in the region.

Question: What other factors might contribute to a downturn in economic growth in Sub-Saharan Africa?

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